Correlation Between Etsy and Hour Loop

Can any of the company-specific risk be diversified away by investing in both Etsy and Hour Loop at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Etsy and Hour Loop into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Etsy Inc and Hour Loop, you can compare the effects of market volatilities on Etsy and Hour Loop and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Etsy with a short position of Hour Loop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and Hour Loop.

Diversification Opportunities for Etsy and Hour Loop

0.05

Correlation Coefficient

Etsy  Hour Loop

Significant diversification

The 3 months correlation between Etsy and Hour is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Hour Loop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hour Loop and Etsy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Etsy Inc are associated (or correlated) with Hour Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hour Loop has no effect on the direction of Etsy i.e., Etsy and Hour Loop go up and down completely randomly.

Pair Corralation between Etsy and Hour Loop

Given the investment horizon of 90 days Etsy Inc is expected to under-perform the Hour Loop. But the stock apears to be less risky and, when comparing its historical volatility, Etsy Inc is 5.37 times less risky than Hour Loop. The stock trades about -0.03 of its potential returns per unit of risk. The Hour Loop is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Hour Loop on October 7, 2024 and sell it today you would earn a total of  125.00  from holding Hour Loop or generate 95.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Etsy Inc  vs.  Hour Loop

Etsy Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Etsy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hour Loop

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etsy and Hour Loop

The main advantage of trading using opposite Etsy and Hour Loop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Hour Loop can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hour Loop will offset losses from the drop in Hour Loop's long position.

The idea behind Etsy Inc and Hour Loop pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.